A necessary precondition to be permitted to get into an Individual Voluntary Arrangement (IVA) is that you simply must first be insolvent. Even though there are actually alternative options for the insolvent person that include bankruptcy, this analysis shall just simply examine the benefits and drawbacks of the IVA solution when you are unlucky enough to find yourself in this situation.
An IVA will give you respite from your debts whilst helping you to pay back as much as possible to your lenders. You will avoid the stigma of bankruptcy with its linked handicaps, constraints and requirements, while making it possible to retain superior control over your property by for instance being in position to maintain your home and your car. When participating in an IVA you’ll be able to maintain your employment and if you are self-employed you can carry on business for the full term of your IVA contributing to more significant yields for your creditors.
Your IVA will be binding on all your creditors, such as dissenting creditors, providing it is agreed upon by 75% of the lenders who opted to vote at the formal meeting of creditors. Voting rights are dependent upon the amount of debt you have with each creditor. A good way to look at it is that each pound of debt is comparable to one vote. You will achieve an improved level of realizations in an IVA than you would reach in bankruptcy, creating increased outcomes for your creditors. You will also incur lesser costs in an IVA than you would bear in bankruptcy, again producing larger yields for your creditors.
You will definitely be subject to less publicity through all steps of an IVA than you would go through in bankruptcy. One example is, in an IVA there is no mandatory publication of your name in papers or other magazines. If your circumstances change significantly during the duration of your IVA, you can, with the consent of your creditors, change the terms and conditions of your IVA. There is also a trend towards minimal (and decreasing) court participation in IVAs. This benefits you and your lenders. The IVA procedure is well governed so you will have a high level of defense against unscrupulous practices. On acceptance of your IVA, all lenders must stop calling you, interest on your debts is frozen and all penalties and charges are halted. Every one of your debts are dealt with and cancelled in a known and limited interval – usually five years – but it can be quicker.
Your monthly payments in an IVA will be affordable. Instead of monthly payments you can undergo a one-off IVA by making merely one lump sum payment with a significantly reduced duration of perhaps less than one year. You need to pay the set-up, administration and disbursement costs of the IVA. Even so, these costs are taken from your monthly contributions to your IVA.
If creditors do not agree to your IVA at the formal meeting of creditors, they are free to carry out other legal measures against you including petitioning for your bankruptcy, obtaining court judgments against you or registering charges on your property. Rather than just agreeing to or rejecting your IVA proposal as it stands, lenders have also the choice of altering its terms and conditions at the outset. These kinds of alterations generally try to increase your monthly contributions to your IVA and your IVA may be unsuccessful during its period of supervision if you are unable to sustain these types of elevated payments. Creditors may seek to constrain the amount of living costs which you may assert in your IVA rendering it less generous than what is authorized in bankruptcy. This adds to the possibility that your IVA may not succeed in supervision if you can’t genuinely survive within the restrictions made. If you do not consent to the modifications proposed, then your proposal is reckoned to be declined.
The duration of your IVA during which you must make payments is commonly five years as opposed to at the most three years in bankruptcy. You will not be permitted to get a loan throughout your IVA, except with the specific permission of your supervisor and/or your creditors. You credit ranking remains unfavorable even after completion of the duration of your IVA. Your own name continues to show up on your records – as monitored by the credit reference agencies- for six years from the start of your IVA or from when your delinquency was first registered.
When you have thought about the benefits and drawbacks of an IVA for you, you should consider looking for expert counsel from one (or more) of the numerous firms providing insolvency services. They use the services of professionals called Insolvency Practitioners who will make available to you free of charge advice describing your complete solutions. You should also consider phoning CAB or the CCCS and you may even have to take impartial legal advice, in particular when you have or in part possess property and assets for example a family home, so that the rights of other persons are protected. Such third parties include your partner or spouse (whether you are co-habiting or estranged) any co-owners of property in addition to any dependents you may have.